Precious metal enhances miners’ appeal

Gold stocks turned in a solid sharemarket performance as the price of gold rose above $US1600 an ounce, but some market watchers think it’s not too late to take advantage of the yellow metal’s record run.

An increase in talk about the potential for a third round of quantitative easing from the US Federal Reserve, and fears of the European debt crisis intensifying pushed gold to a record $US1607.45 late on Monday, Australian time.

The gold price closed higher in New York on Monday night for the 11th consecutive session, matching its longest winning streak since July 1980.

But despite concerns that the gold price might have peaked, there was still potential for further upside in the gold stocks, Credit Suisse analyst Michael Slifirski said.

There were still entry points to gold stocks despite their recent share price runs, Mr Slifirski told clients in a note, with
Perseus Mining
a top pick, thanks to the expectation that the group will pour its first gold by the end of the September quarter.
Gryphon Minerals
is another favourite, with promising high-grade drilling results from its Banfora mine in Burkina Faso.

Among stock moves yesterday,
St Barbara
, which had fallen out of favour through June, thanks to its failed bid for smaller rival
Catalpa Resources
, was the best performing of the gold stocks yesterday, up 3.44 per cent.
Regis Resources
,
OceanaGold
,
Alacer Gold
and
Medusa Mining
were other gold names that outperformed the S&P/ASX 200 yesterday.

The gold price run has made it more than just a one-day story, however, with pure-play gold miners taking four of the top 10 spots for the best performing stocks on the S&P/ASX 200 over the past month.

Perseus Mining, OceanaGold and
Resolute Mining
are up more than 20 per cent, with Regis Resources not far behind at 19.5 per cent.

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Australia’s largest gold miner,
Newcrest Mining
, which dwarfs its smaller competitors with a market cap of $30.9 million, has underperformed the gold price recently. But it remains one of the “most attractive value plays for long investors", Mr Slifirski said.

With a flurry of corporate activity in the resources sector so far this week, there is speculation that further consolidation activity among mid-cap gold miners may not be far off, after Catalpa Resources and Conquest Mining announced a $1.1 billion merger in May.